Mr. P is an investor and he has got the proposal for investment in Company A and Company B. The particulars of Company A and Company B are herein given below: (i) Company A is a highly diversified company. It has stable

Securities trading involves the probability of a loss or drop in value. Trading risk is divided into two general categories: (1) Systemic risk which affects all securities in the same class and is linked to the overall capital- market system and therefore cannot be eliminated by diversification also called market risk. (2) Non-systematic risk which is any risk that isn't market-related or is not systemic also called non-market risk, extra- market risk, or un-systemic risk. Systematic Risk Unsystematic Risk It is not fully uncontrollable by an organisation. It is usually controllable by an organization. It cannot be fully assessed and anticipated in advance in terms of timing and gravity It can be usually assessed well in advance with reasonable efforts and risk mitigation can be planned with proper understanding and risk assessment techniques. Example of such type of risks are Interest Rate Risk, Market Risk, Purchasing Power Risk Examples of such risk are Compliance Risk, Credit Risk, Operational Risk It usually affects a large number of organisations operating under a similar stream. If not managed, it directly affects the individual organisation first It is usually of a macro nature It is normally micro in nature It is not entirely predictable. It is reasonably predictable. Keeping above in view, investment in "Company A" would be covered under unsystematic risk and investment in "Company B" would be covered under systematic risk